The 'V' Shaped Recovery
Fed is not anticipating a V shaped recovery.
The fed is currently fighting massive deflationary pressures. Businesses (if they're open) are slashing prices, oil demand is at record lows, etc etc. Even as the fed's balance sheet grows to a record 5.3 trillion, March inflationary rate still fell to 5 year lows.
If this was really going to be a V shaped recovery and things would quickly go back to normal in a few months, then you'd have a return of previous consumer spending levels on TOP of the feds massive stimulus, as well as the CARES act handouts. 'Normal' spending + trillions injected into the economy = massive inflation. The fed can just snap it's fingers and erase it's stimulus when it feel like it. This is not about supporting the economy through several months of a recession, this is about preventing global economic annihilation. In my opinion, the fed is trying to provide a softer and more gradual downward trend for the markets and buying time for a therapeutic/vaccine/Gradual opening of the economy.
But it's no secret that the Fed is not anticipating a V shaped recovery, just ask Kashkari.
The fed is currently fighting massive deflationary pressures. Businesses (if they're open) are slashing prices, oil demand is at record lows, etc etc. Even as the fed's balance sheet grows to a record 5.3 trillion, March inflationary rate still fell to 5 year lows.
If this was really going to be a V shaped recovery and things would quickly go back to normal in a few months, then you'd have a return of previous consumer spending levels on TOP of the feds massive stimulus, as well as the CARES act handouts. 'Normal' spending + trillions injected into the economy = massive inflation. The fed can just snap it's fingers and erase it's stimulus when it feel like it. This is not about supporting the economy through several months of a recession, this is about preventing global economic annihilation. In my opinion, the fed is trying to provide a softer and more gradual downward trend for the markets and buying time for a therapeutic/vaccine/Gradual opening of the economy.
But it's no secret that the Fed is not anticipating a V shaped recovery, just ask Kashkari.
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